City moves closer to natural gas refinancing
He explained the refinancing essentially had the city paying roughly $1.6 million a year for the next 35 years into the bonds. He said the option to reevaluate the refinancing process may come up as the economy changes, but this way the council will have guidelines to work with. He said the council will be provided with updates as the three companies handling the refinancing move forward.
Bonham said there will likely be one more special meeting dealing with the natural gas refinancing coming up, primarily to set the natural gas rates. He said that meeting will most likely happen before the end of the year.
In June 2007, the council passed resolution 07-4284, first declaring its intention to refinance the city’s natural gas utility.
City Administrator Rob Hill said at the Sept. 17 meeting that after working with E.J. De La Rosa and Company and Dan Bergmann from Interstate Gas Service in 2007, it was determined the city’s gas system wasn’t ready to be refinanced.
Hill said that due to the city’s ability to acquire additional natural gas customers and reallocate overhead costs, it is now ready to tackle the refinancing project.
At the Oct. 1 council meeting, the Council approved the appointment of three separate firms to help in the refinancing of bond obligations issued to finance the natural gas system. It named the banking firm Westhoff, Cone and Holmstedt as the underwriter, The Weist Law Firm as the bond and disclosure counsel, and the bank of New York Mellon as the trustee. It will be through the efforts of these companies, in conjunction with city staff, to refinance the natural gas debt.
The city began construction of its natural gas distribution system in November of 2000. It has attracted customers from Lassen Community College to Lassen High School, yet has consistently had problems making or maintaining a profit.
When the city’s budget was passed at a regular council meeting in June, City Finance Director Robert Porfiri said the natural gas fund was in a particularly dangerous situation, as the outstanding debt created by the fund needed to be refinanced within the next year or two. Based on the figures presented at the June meeting, the gas fund stands to lose $457,487 for the 2008-2009 fiscal year alone, as a difference between the fund’s expenses versus its income.
“As somebody who lives in the city, I think the single most important thing the council and the city is facing is the refinancing of these bonds,” said District 2 Supervisor Jim Chapman at the Oct. 1 meeting. “I really want to commend you guys for taking that step. I think time is short, and hopefully that financial mess back east won’t delay it.”
Chapman went as far as saying that the action to decide to refinance the natural gas could be the defining legacy of the current council.
The city council has split the bonds into four separate series: Series A is a bond consisting of $8.785 million, Series B consists of $8.28 million, Series C consists of $5.185 million and what was referred to as the 2003 Series, consists of $1.99 million. The 2003 series, according to the resolution, consisted of the funds used to finance the building of the project.
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